Bloomberg

Bloomberg | Quint is a multiplatform, Indian business and financial news company. We combine Bloomberg’s global leadership in business and financial news and data, with Quintillion Media’s deep expertise in the Indian market and digital news delivery, to provide high quality business news, insights and trends for India’s sophisticated audiences.

U.S. President George W Bush addressing the Heads of State at a dinner hosted by him in White House in connection with the Summit on Financial Market and the World Economy, at Washington, USA on November 14, 2008. (Photograph: PIB)

The Latest G-20 Looks Messy, But Summit Was Born Out of Crisis

(Bloomberg) -- As world leaders gather for what could be their most fractured Group of 20 summit yet, the men who founded the annual meeting want you to know -- it only exists because of crises that the West can’t handle on its own.

By the late 1990s, it was becoming clear to policy makers that economic troubles didn’t stop at western borders, and that traditional meetings like the Group of Seven were ill-suited for new challenges. That point had been painfully underscored by the collapse of the Mexican peso, the Asian financial crisis and the rise of emerging economies.

“The G-7, we came to believe, was unsuitable as the sole steering committee for the global economy,” said Lawrence Summers, a U.S. Treasury secretary in the Clinton administration. And so he and Canadian Finance Minister Paul Martin jointly championed a new forum -- the G-20. “There were some countries that were more enthusiastic than others,’’ Martin said.

This year’s G-20 leaders’ summit, concluding today in Buenos Aires, comes at a time of unusual global strain. China and the U.S. will use the event to seek a truce in their brewing trade war, while discussions on the sidelines involving the conflict in Yemen, renewed Russia-Ukraine tensions and a Saudi columnist’s assassination could overshadow the summit itself.

In interviews, Martin and Summers expressed optimism for the summit’s survival -- but it doesn’t mean smooth sailing. “It’s fair to say more people view the coming G-20 with more apprehension than ever before,” Summers said.

Martin recalled a G-7 meeting where he and Summers ducked into a room to discuss the idea that the G-7 alone didn’t cut it anymore. Others were at first cool to the notion, but the U.S. and Canada were on board. “Larry agreed. And I said, fine, let’s put together the countries that should be involved. I said I think it should be 20, he agreed, and we just sat there,’’ drawing up a list of nations, he said.

It worked, and G-20 finance chiefs held their first meeting in 1999 -- launching a forum focusing on global growth and the economy. G-20 leaders first met in 2008, in the depths of the financial crisis.

“At the leaders’ level, it was born of the financial crisis, just as with the financial ministers’ level, it was born of the Asian financial crisis,’’ said Martin, who went on to serve as Canada’s prime minister.

It was the next meeting, in 2009 in London, that cemented the G20’s legacy, Summers said. It announced new funding for the IMF and made a joint-pledge to do whatever was needed to spur the recovery. “It was a very important contribution to stabilizing the most dangerous financial moment of the last 75 years,’’ he said.

London was by far the most important meeting, but that doesn’t mean the organization needs to make a “historic difference” every year, he said. “They exist so they can be called on when crucial moments arrive. And I think the G-20 has been a useful forum,” he said.

Martin said the G-20 passed a “very important test’’ last year in Hamburg, when it withstood the U.S. announcement of quitting the Paris climate accord. “The Leaders of the other G-20 members state that the Paris Agreement is irreversible,” the joint statement said, after noting the decision by President Donald Trump.

The G-20 has fostered a sense of connection that has helped sustain global growth, Summers said. “The real question is its efficacy as a steering committee for the global economy, and the broader question of whether we’re going to have a managed global economy or whether we’re going to have a state-of-nature, each for its own, dog eat dog kind of global economy,’’ he said.

Next year’s G-20 will be held in Japan, with Saudi Arabia due to host the following year. Summers said he expects the meetings to continue even as the U.S. pulls back from its traditional role globally.

Martin said the G-20 remains relevant and well-positioned to take on today’s problems. “Climate change, the death of oceans, these are issues which no country can solve on their own, they can only solve if the world comes together and there needs to be a steering committee to get the world there,’’ he said.

Martin would like to see the U.S. and China use the G-20 to come back from the brink in their trade war. “What I hope will happen is that all the countries around the table will put a lot of pressure on the two countries involved to come to a truce,’’ as well as offer their support for the World Trade Organization, he said.

“The G-20 is fighting the good fight -- what’s really important now is that it wins some of these battles,” Martin said, adding that the summit’s main purpose is to avoid the crises of tomorrow, even as today’s problems loom large. “When you ask them to basically deal with today’s issues, there is going to be stress. And so be it. That’s why it was created.’’